Panel on Product Technology in TechSparks Sees Positive Changes in India to Start a Product BusinessTeam YS
“Once-in-a-lifetime opportunity available now as markets are opening up”
Charles Assisi, the executive editor, Forbes India, started the panel discussion on Product Technology: Investment, Opportunities, and Challenges. He felt he is an outsider in the panel as he only hears stories that people like the panelists tell him. The panel was graced by Alok Mittal, MD, Canaan Partners; Shailendra Singh, MD, Sequoia Capital; Prashant Choksey, cofounder, Mumbai Angels; C.V. Prakash, founder and CEO, Gradatim IT Ventures; and Girish Joshi, Technology Advisor, Microsoft BizSpark India. His story-telling abilities and technology focus came to the fore when he asked the audience about Po Bronson who wrote The Nudist on the Late Shift and Other True Tales of Silicon Valley. He added that Bronson, unable to find that one image that defined Silicon Valley, clicked Yahoo! cofounder David Filo curled up under his desk in his office and put that up on the first page of his book. This exemplified Silicon Valley. “This picture was infectious and created a lot of buzz,” he said. That kind of an image was developing in India. He regretted that the ecosystem that started evolving in 1996 around product tech in India went kaput. He narrated a story about an IIT Bombay student starting up, getting funded, going to America and then quitting on finding a girl. He then talked about Shradha, YourStory founder, starting on her own in 2008. When he checked with her, she said, “you don’t know. A lot of exciting things are happening around this space now.”Support system available today
Talking about what has changed in ten years and what the lessons are, Prakash, a serial entrepreneur of four startups including his latest one (a product startup) that fetched him a funding of $11 million, said, “the kind of support system that exists today is much more helpful.” For a product startup, focus is absolutely essential in his view. Five years ago, starting a product technology company was difficult. Today it is not the case.
Alok Mittal, talking about what exists today, felt that markets are picking up on their own. JobsAhead.com, Alok’s Internet business in 1999, did not enjoy the kind of reception that online businesses receive today. Investors are believing about India and entrepreneurs are confident themselves more than ever. He quoted the example of MakeMyTrip.com, and the persistence of Deep Kalra in seeing the company through to a listing on the Nasdaq. He asked the entrepreneurs to grab the opportunity that is showing up now because markets are opening up.
Cloud computing is the game changer today for startups
Shailendra Singh, talking about the present, said the future will look different from the past. Risk-averse being part of our culture and services business being easy to build and give profitability did not augur well for entrepreneurs to start a product business in the past. He quoted reasons for the changed scenario at present. Infrastructure on the Internet and cloud computing enabling scale through on-demand models at variable cost has helped startup entrepreneurs sell to enterprises on a pay-per-use basis and the cheaper cost involved in the whole process, which did not exist before, has also played a crucial role.
Customers fund businesses
Prashant Choksey felt that spray and pray culture has changed in India. He quoted Startup Nation, a book on innovation economy in Israel. Israel has more companies listed on the Nasdaq than Europe and India put together. India is nowhere there. The reason for innovation in Israel is that companies are funded by customers rather than investors. These customers turned out to be defense establishments. He felt that seed funding is not sufficient in India at present. And using the once-in-a-lifetime opportunity, Prashant felt that entrepreneurs can benefit from other developments that are happening around like cloud computing. He was happy about the 25 companies that Mumbai Angels funded are doing well.Need an IDF-like body
Girish Joshi, commenting on the trend visible as on today, talked about Israel. He met a friend who told him that crème de la crème of Israel’s technology geeks join IDF on three or even six year assignments. Then, once out of IDF, they build a product business. IDF is the breeding ground for entrepreneurship in Israel. Now the demand in India is attractive enough to start a venture. Investing community, angel and VC and the major US funds being available in India, incubation centres numbering about 60, and ecosystem enablers like TiE, NASSCOM and smaller ones like YourStory along with corporates like Microsoft, Google, and Oracle are all coming together in India to provide a viable ecosystem for someone who wants to start on their own. The entrepreneurial bug-bitten executives, whether they are in US or in India, have also started founding new ventures. Risk-taking attitude has changed dramatically over the last ten years, according to Girish.
Have a five-year product plan
Prakash felt the business plans that focus on financial projections over the next five years are absurd in product business. Instead, he felt the focus should be on whether the product will create value in the next five years. He quoted the example of product evolution using the Apple strategy of creating iPods and then iPads, thus making a progression. Access to global tools enabled by cloud computing is another positive opportunity available today. He feels that committing to five-year plan in a product is the vision that product entrepreneurs should have.
Lack of spectacular success stories but still it’s happening
Talking about risk-taking abilities of Indians, Shailendra Singh said that critical mass of entrepreneurs succeeding will open the floodgates. What is lacking is spectacular success stories. MakeMyTrip’s debut for $900 million on Nasdaq and the best closing for Nasdaq this year are the kind of successes that will influence others to take risks. He quoted Sabeer Bhatia’s Hotmail sale to Microsoft for a whopping amount despite Hotmail not making any revenues. This spurred others to venture out in huge numbers, he said. He also said that many people are starting on their own out of schools and colleges. He added that Sequoia has recently funded an entrepreneur just out of IIT-Kanpur, which has not been made public yet.
We are taking enough risks
Alok Mittal felt that risk-taking abilities are beyond question in India but we lack success stories. If there are more success stories, someone will write Startup Nation for India, Alok said. He also said that Startup Nation was written once successes were made and it was more of a hind sight.
Enterprise software products and startups: a perspective
Answering a query from a participant, Shailendra said that enterprise software is seeing a shift in adoption. Enterprises are willing to buy a startup company’s products because of the costs. Huge license costs are saved by enterprises who are comfortable with pay-per-use model. This shift is definitely happening but its pace is unpredictable as there will be early adopters and late adopters of this trend. Alok Mittal added that banks and telecom companies are reaching out for startup’s software products. He felt that there is a shift in business model that is taking place. Girish, supported by statistics out of his own experience, also agreed that the trend of enterprises adopting startup products is beginning to happen.
Out of 700 startups that are profiled by Microsoft, 30% are in online business, according to Girish. Charles digged a bit deeper about the inability of product startups not taking off in India to which Girish said local market dynamics is the crucial factor. “If the local market is not exciting, not many people would enter enterprise software space,” added Girish, although 20% of the companies have figured out that the market outside India is more relevant. After figuring out the sectors in India, these companies also focus on foreign markets.
Lack of ideas?—Disruptive technologies are not witnessing traction
Charles then shifted focus to the ICRA report that identified at least 40 disruptive technologies that India should be adopting. “When Indian product tech companies were scored on a scale of 1 to 5 on all these 40 technologies, they turned out to be miserable,” added Charles. ICRA could see some competencies though in composite materials, radar technologies, textile machinery, etc. As regards future technologies such as GM foods, climate modeling, electric cars, etc., not much traction is visible.
What is the reason? Prashant answered the question by stating that Mumbai Angels are sector-agnostic as far as their funding in concerned. The funding involves domain experts who are investors. But sometimes these domain experts get interested in other sectors that are coming up in which they invest. Education space has generated lot of interest for Mumbai Angels. Mobiles are their hot favorites. Internet and telecom are also other focus areas. Microfinance and microhousing areas are very much in Prashant’s radar, as housing is one of the businesses of Prashant. He also is interested in social ideas that have a business sense for inclusive growth.
Answering a specific question on disruptive technologies, Prashant felt entrepreneurs are focusing on them to some extent. Girish felt the ideas are coming by and are focused on mobile, especially those related to 3G and 4G. Lateral consumption of content on the mobile is also another hot area where most focus is given by entrepreneurs. The other focus area is SMEs. The two trends are interesting to watch.
Business model disruption is more visible than technology disruption, according to Alok. This is because research trails market. Some markets are becoming large enough that academic research folks are focusing on them. As far as microfinancing is concerned, innovation is happening as the market has become available. Technology disruption will happen as markets mature, felt Alok.
Shailendra said that the US market is very mature and is 30 to 40 years old. Technology market is huge in US. InMobi and ZOHO have created markets in India.
The other company is Druva, which has 13 engineers out of its R&D centre in Pune, selling in 20 countries. Commenting specifically on the nature of product companies that approach Sequoia for investments, he could see that the quality of product companies is growing day by day.
Prakash feels it feels great to be an entrepreneur in India and one should not look for venture money always. Instead, they should focus on building competency.
Shailendra encouraged entrepreneurs to ask for help. He gets lot of calls from entrepreneurs. He just told the entrepreneurs to reach out to people in case they need help.
Matrimony, B2B, and online travel are creating markets after building a product, said Alok Mittal answering a question from a participant on why markets cannot be created after the product is designed.
Prakash would bet on cloud computing and virtualization and consumer interactiveness as the possible technology businesses he would get into when Charles asked him what would he start, as an entrepreneur, in product business today. Then Charles asked the investors if this idea is fundable. Alok said lot of investments are happening in these areas already.
Charles Assisi effectively steered the conversations that resulted in effective discussions with the investors Alok Mittal, Shailendra Singh, and Prashant Choksey providing their perspective, technologist Girish Joshi throwing his insights on technology, and the entrepreneur Prakash presenting his entrepreneurial views. A good food for thought at the end. Interestingly, the session did not witness the usual post-lunch inertia from the audience. To make it lively, Charles, in the midst of the discussion, threw open the floor to the audience briefly telling them he was checking if they were awake after lunch!
-- Venkatesh Krishnamoorthy’s report from the TechSparks venue